The gold market remains stuck in a tight trading range as it has for weeks now. The market is stuck sideways may not be a negative, however, and could be a big positive. Recent data from the CFTC showed that the amount of speculative interest in gold has declined to the lowest level in three months. The shift in gold positioning was not a huge surprise, however, as investors awaited the latest decision on rates from the FOMC. That meeting took place last week,  and the Fed elected to stay on hold but suggested two more rate hikes would be seen this year. Despite not raising rates again last week, the Fed’s language was decidedly hawkish.

As the number of bullish gold specs declined, the gold market remained in a tight range from $1,950 to $1,980. The Fed’s hawkish pause last week did cause gold to fall, testing $1,930 in the process. The metal did not stay down for long, however, and shortly after testing $1,930 was back in its previous trading range. The price action seen in gold would seemingly suggest that there is still significant bullish interest in the market, but investors are perhaps being more tactical about how they go about building a position.

The gold market is possibly seeing some bullish support from a lack of faith in the Fed’s bullishness on interest rates. Despite suggesting that multiple rate hikes will be seen this year, some may be doubting the Fed’s desire and determination to raise rates. Some even feel the next Fed move may be more likely to be a rate cut rather than a hike. This opinion may increase if worries over a recession continue to mount in the months ahead. Whatever the case may be, however, gold has done a good job of holding onto some recent gains and has thus far not appeared overly vulnerable to the downside after a lack of upside follow-through. Of course, the longer gold is unable to mount a fresh offensive, the more likely it may become that the bears take control of the market.

The bulls need to show some strength before speculative interest in the metal increases again. That means the metal may need to attack the $1,985 level before attracting fresh bulls into the market. A close above the $2,000 level would almost certainly reignite the bulls, and the market could then be off to the races. A close below the $1,950 level may have the opposite effect, attracting fresh bears into the market who may push the metal for a test of the $1,900 level.

The market has many potential catalysts for a move up or down. The Federal Reserve and its plans for interest rates, the war in Ukraine, the potential for a Chinese takeover of Taiwan, and other factors may all influence the gold market in the months ahead.

The gold market was off to a tough start this morning as the new trading week got underway. Dollar strength was keeping the bulls at bay, and allowing the bears some wiggle room to the downside. Recent data, however, pushed a jump in gold prices that took the metal higher by several dollars on the day. The most recent reading of ISM Services PMI declined to 50.3 in May. This reading was lower than anticipated, and also lower than the April reading of 51.9%. Consensus estimates were looking for a reading of 52.6% for May. The gold market saw a solid bounce off of support in the $1,950 area and is now trading around $1.956.

The data stream may become increasingly important as the next FOMC meeting approaches at the middle of the month. At this point, some feel the Fed is likely to signal a pause in its rate hiking campaign. Others, however, feel the Fed may remain hawkish and could avoid signaling any such pause to higher rates. Whatever the Fed does or does not do, it does have the potential to move markets. Although business conditions may currently be considered stable, there may be increasing concerns over a slowing economy. This slowdown could lead to a recession, and recession has been a worry for some time now. If the Fed elects to take a pause, it could alleviate some of the recession worries. If the Fed decides to stay the course, however, it could exacerbate those worries and fuel a global recession in the months ahead. In  reaction to the ISM data, markets are pricing in a very high likelihood of the Fed doing nothing at its meeting next week.

Other areas of the economy are also losing momentum. The employment index fell into contraction territory last month with a reading of 49.2%. Readings below 50 are considered to show contraction while readings above 50 signal expansion. Despite much of the weaker-than-anticipated data in recent weeks, the rate of inflation has been coming down. Inflation remains quite high, however, and is still well-above the Fed’s desired target of 2% annually. With inflation moving in the right direction, it could give the Fed even more reason to consider taking a pause on its hiking campaign. For the time being, the markets will monitor the data stream and try to guess what the central bank will do at its next meeting and at the meetings to follow.

The gold bulls remain in charge on the daily chart. Their control has largely faded in recent weeks, however, as they have failed to maintain a run above the $2,000 level. That remains the next target for the bulls, and a close above it could send the metal sharply higher quickly as momentum players and trend traders jump on board again. The bears will look to take the market below the May lows around $1,950 and then the $1,900 level below.

The gold market is lower Monday as bearish outside market action and bearish charts take a toll on sentiment. A stronger U.S. Dollar Index as well as a rise in treasury yields are pressing gold today as recently deteriorated chart posture also plays a role. Despite these factors, gold is only down by $2 per ounce in late morning trade.

The Fed has maintained its hawkish stance for some time now. Many are now wondering if the central bank will raise rates again at its next meeting set to take place in June. Earlier today, Minneapolis Fed President Neel Kashkari said the Fed is determined to bring the inflation rate down to 2% annually. He did say, however, that he was unsure if the Fed would raise rates again next month. If the Fed does decide to not raise rates again in a few weeks, it could prove to be nothing more than a hawkish pause before the Fed continues its rate raising. The Fed has seemingly been unable, thus far, to show any major signs of taking a more dovish approach to its policy. While inflation has calmed down in recent months, it remains far above the Fed’s desired rate of 2% annually and may need even higher rates to bring it down further.

As long as the Fed maintains its hawkish posture, the gold market may see limited upside from recent levels. The dollar may see strength and that could also weigh heavily on gold if the currency is able to maintain higher ground. The gold bulls may be able to keep the market around the $2,000 level for now, but will eventually need a fresh catalyst to take prices higher on a sustainable trajectory. A breakout above the $2,000 level, on a closing basis, could set the stage for the bulls to take the market higher, possibly back to previous all-time highs. If the bulls fail to keep the market near the $2,000 level, however, the bears could find themselves in increasing control of the market and could eventually take prices down to $1900 or lower.

The U.S. is rapidly approaching the deadline for its debt ceiling. President Biden and Speaker McCarthy are meeting today to discuss the matter and hopefully will make some progress as negotiations move forward. A U.S default, which could take place in early June, could be catastrophic for the global economy and could put the U.S. economy into a deep and prolonged recession. Although a default could be terrible for the U.S. and its currency, it could also be highly bullish for gold and could propel the metal well into fresh all-time high territory.

In the meantime, the gold bulls still have the technical advantage but are fading quickly. If that advantage is lost, the bears could very well drive the market lower quickly, and a test of the $1900 level could be seen in short order.

The Federal Reserve has been busy raising interest rates for some time now. After hiking interest rates at the fastest pace since the 1980s, the Fed may now see fit to take a breather. Recent data shows inflation easing for a 10th month, and that lighter inflationary data may give the Fed the green light to take a pause from rate hikes.

The Consumer Price Index, or CPI, rose 4.9% in April. The 4.9% rise from the year earlier was the smallest increase since April 2021. On a monthly basis, prices rose by .4% compared to a rise of .1% in March. The monthly rise was driven primarily by the cost of fuel, used vehicles and housing. Despite the annual rate of inflation falling by nearly half since June, the rate is still far above the Fed’s desired target of 2% annualized. The rate hikes that have taken place over the last several months are still working their way through the economy, however, and may continue to clamp down on price pressures in the months ahead.

The easing of inflationary data is likely to give the Fed reason to pause. Concerns over a recession have been on the rise again in recent months, and as long as the Fed is raising rates the likelihood of a recession may increase. The Fed standing ;pat on rates, however, may give the economy some breathing room and could prevent a recession from occurring.

Stocks remain not far from all-time highs and the markets could potentially stage a comeback if the Fed signals no more rate hikes are forthcoming at this time. Such a signal could arrive at the next FOMC meeting or even through Fed official commentary beforehand. Investors will be paying close attention to any details or plans from the Fed, as the central bank could be the main driver of market action in the summer months.

The gold market is still highly bullish, with the bulls maintaining control of the metal. The bulls need to target and take out the $2100 level on the upside. The bears, on the other hand, need to target and produce a close below the April lows around $1965. Price action between these two levels may be indicative of back-and-fill trade before the market attempts to make another run higher. The gold market may already find itself within the summer doldrums, however, as the Fed looks to pause and as the headline cycle quiets down.

The possibility of further deterioration between the U.S. and China may keep gold investors in the market. China has been stockpiling a significant amount of gold bullion for some time now, and some believe that China is gearing up for a move away from the dollar. If China were to move away from the dollar, it could pave the way for other nations to do the same. Dollar weakness due to rising supply and declining faith in it could put gold into major rally mode, possibly sending the metal to fresh all-time highs.

The gold market is now trading solidly below the key $2,000 level. After being higher by a few dollars per ounce earlier in the session Monday, gold has now dipped and is well into negative territory. Spot gold prices are now down over $6 per ounce at $1977 and change and are vulnerable to a larger scale sell-off if things do not change quickly. A weaker U.S. Dollar and a decline in treasury yields were driving gains earlier in the session. Despite these bullish outside market postures, however, investors may remain largely focused on the Fed and its plans for more rate hikes.

Stock indices have also been hit recently as worries increase over the Fed keeping rates higher for longer. Even as recession concerns mount in recent months, the Fed thus far appears intent on getting inflation under control regardless of the potential consequences. The Fed is likely to raise rates again at its next FOMC meeting but could then possibly signal a pause in rate hikes. Of course, the Fed cloud also signals that it intends to keep going with rate hikes and that rates are going to remain elevated for longer than anticipated. Should the Fed desire to convey this message, it could potentially move markets significantly. Not only would stocks and gold potentially see large moves, but investors could also take a “run for the hills” approach and look to exit all markets simultaneously.

The Fed and its plans have been and will continue to be a major catalyst for the gold market. The market is also paying close attention to the global geopolitical scene, however, and could also see movement based on any changes within it. Tensions between Russia and the West have not been this high since the days of the Cold War, and worries over a Chinese invasion of Taiwan have been on the rise in recent months. Such an invasion would almost certainly cause the U.S. to become directly involved, and it could even be the beginning of the Third World War.

Looking at the long-term rather than just the short, the gold bulls likely recognize the risks in the global marketplace currently and are buying gold based on those risks. Even with gold’s recent downturn, the market remains within a strong trend higher on the daily chart. The six-week-old uptrend will need to be updated at some point, and the bulls will target the April highs around the $2.063 level before taking on previous all-time highs just above that. The bears are targeting the April low of around $1.965 and will not have much going without a breakdown below this level on a closing basis. The market may now need to spend some time moving sideways, however, as some back-and-fill trade takes place. If the bulls retake the $2,000 level, the move higher could happen quickly and decisively.